OVERVIEW
Chemicals and Chemical Products Subsector in Malaysia
The chemicals and chemical products is one of the nine subsectors identified as the productivity nexus under the Malaysia Productivity Blueprint 2017. This sector encompasses a vast array of products, from agrochemicals, industrial gases, inorganic chemicals, organic chemicals, paints, soaps and detergents, cosmetics, and toiletries as well as other chemical products. Additionally, this sector supplies essential raw materials for various industries, such as electronics, plastics, construction, and pharmaceuticals. In fact, chemicals are everywhere, with approximately 90% of everyday products containing them. With over 100,000 chemicals available today, this sector's significance is undeniable.
Productivity Performance
The subsector's labor productivity growth has been volatile over the past five years. It grew by 1.2% in 2018, but then declined by 2.1% in 2019 and 4.0% in 2020. However, it rebounded strongly in 2021, growing by 10.3%. In 2022, it is expected to grow by 2.1%. Overall, the chemicals and chemical products subsector has experienced volatile labor productivity growth over the past five years, underperforming the national average. It showed signs of recovery in 2021, and is expected to continue to grow in 2022.
The subsector is expected to continue to grow in the coming years, driven by strong demand from both domestic and international markets. The subsector is also expected to benefit from the government's focus on developing the downstream petrochemical industry.
Challenges
Inability of SMEs to adapt to technology changes
- Unaware of investment benefits and unequipped with skills to manage the digital transition
- SMEs rarely make the large investments associated with shifting to digitalisation and mechanization.
SMEs unequipped to effectively expand internationally
- Chemicals and chemical products subsector is also constantly threatened by the shrinking size of domestics market.
- Unequipped to expand internationally and form strong partnerships with foreign players
Insufficient talent
- Lack of collaboration between industry players & education institution offering chemical related courses.
- Lack of quality local graduates, who are not industry-ready and unable to meet the changing demands of the niche chemical industry
Limited presence in high value added segments
- Almost 80% of chemical enterprises operate within the low value add segments.
- Lost opportunities by not leveraging specialty chemicals as well as the modification and formulation segments.
